Civitas Solutions, Inc. (NYSE: CIVI) today reported financial
results for the fiscal second quarter ended March 31, 2017.
Second Quarter Fiscal 2017 Results At A Glance
- Second quarter net revenue increased
4.8% to $362.4 million
- Specialty Rehabilitation Services
segment continued its strong growth, with net revenue increasing
7.3%
- Second quarter net income was $5.5
million, compared to net income of $7.3 million in the second
quarter of fiscal 2016
- Second quarter Adjusted EBITDA
decreased 6.3% to $38.6 million
- Completed two acquisitions with total
annual revenues of $21.6 million
- Adult Day Health platform in Maryland
expanded to 11 centers and approximately $30 million in annualized
revenue with the acquisition of six additional centers
“Our second quarter results reflect volume growth in all service
lines and higher average rates across our I/DD, SRS and ADH
businesses,” stated Bruce Nardella, president and chief executive
officer. “During the quarter we continued to see strong operating
performance from our SRS service line. Our ADH business sustained
its high growth trajectory, driven by the acquisition of six ADH
centers in Maryland. We believe our solid results in the first half
of the fiscal year position us well for the remainder of the year.
In addition, the strength of our business model gives us confidence
in our ability to continue to drive strong free cash flow, reduce
leverage over time, and grow through disciplined investment in
organic and acquisition opportunities.”
Second Quarter Fiscal 2017 Financial Results
Net revenue for the second quarter was $362.4 million, an
increase of $16.7 million, or 4.8%, over net revenue for the same
period of the prior year. Net revenue increased $8.8 million from
acquisitions that closed during and after the second quarter ended
March 31, 2016 and $7.9 million from organic growth. The increase
in net revenue during the three months ended March 31, 2017 was
negatively impacted by an increase in sales adjustments of $2.0
million compared to the three months ended March 31, 2016.
Net revenue consisted of:
- Intellectual and Developmental
Disabilities ("I/DD") services net revenue of $237.5 million, an
increase of 3.0% compared to the second quarter of fiscal
2016.
- Post-Acute Specialty Rehabilitation
Services ("SRS") services net revenue of $77.2 million, an increase
of 7.3% compared to the second quarter of fiscal 2016.
- At-risk youth ("ARY") service net
revenue of $35.7 million, a decrease of 0.2% compared to the second
quarter of fiscal 2016.
- Adult Day Health ("ADH") services net
revenue of $12.0 million, an increase of 63.0% compared to the
second quarter of fiscal 2016.
Income from operations for the second quarter was $16.3 million,
or 4.5% of net revenue, compared to $21.5 million, or 6.2% of net
revenue, for the second quarter of the prior year. The decrease in
our operating margin was primarily due to increases in direct labor
costs and client occupancy costs as a percentage of revenue. The
increase in direct labor costs was the result of higher overtime
pay and an increase in health insurance expense due to higher
enrollment and utilization. The increase in occupancy costs was due
to increases in rent, utilities, and maintenance expenses.
Net income for the second quarter was $5.5 million compared to
$7.3 million for the same period of the prior year.
Basic and diluted net income per common share from continuing
operations was $0.15 for the second quarter ended March 31, 2017,
compared to basic and diluted net loss per common share from
continuing operations of $0.20 for the same period of the prior
year.
Adjusted EBITDA for the second quarter was $38.6 million, or
10.7% of net revenue, compared to Adjusted EBITDA of $41.2 million,
or 11.9% of net revenue, for the second quarter of the prior year.
In addition to the operating factors described above, the
quarter-over-quarter decline in Adjusted EBITDA was impacted by a
$1.9 million gain from a favorable contract settlement realized
during the prior quarter that did not recur. Furthermore, the prior
quarter benefited from $2.0 million less in sales adjustments.
These items were partially offset by $0.4 million in non-operating
gains in the current quarter resulting in a net
quarter-over-quarter impact of $3.5 million.
First Half Fiscal 2017 Financial Results
Net revenue for the six months ended March 31, 2017 was $721.8
million, an increase of $30.4 million, or 4.4%, over net revenue
for the same period of the prior year. The growth in net revenue
was negatively impacted by the divestiture of our ARY operations in
six states during fiscal 2015 and the first half of fiscal 2016,
which resulted in a decrease in net revenue of $7.0 million
compared to the six months ended March 31, 2016. Excluding these
operations, net revenue increased by $37.4 million, or 5.5%, of
which $20.5 million was from acquisitions the closed during and
after the six months ended March 31, 2016 and $16.9 million was
from organic growth. The increase in net revenue during the six
months ended March 31, 2017 was negatively impacted by an increase
in sales adjustments of $3.0 million compared to the six months
ended March 31, 2016.
Net revenue consisted of:
- I/DD services net revenue of $475.7
million, an increase of 3.3% compared to the first half of fiscal
2016.
- SRS services net revenue of $151.5
million, an increase of 8.2% compared to the first half of fiscal
2016.
- ARY service net revenue of $71.4
million, a decrease of 8.3% compared to the first half of fiscal
2016. Excluding the ARY divestitures, ARY services net revenue
increased 0.7%.
- ADH services net revenue of $23.1
million, an increase of 78.5% compared to the first half of fiscal
2016.
Income from operations for the six months ended March 31, 2017
was $31.7 million, or 4.4% of net revenue, compared to $28.7
million, or 4.1% of net revenue, for the same period of the prior
year. The increase in our operating margin was driven by a decrease
in general and administrative expenses compared to the six months
ended March 31, 2016. This decrease was primarily due a $9.1
million reduction in stock based compensation resulting from a
$10.5 million stock based compensation charge recorded during the
first quarter of the prior year. The increase in our operating
margin was partially offset by increases in direct labor costs and
client occupancy costs as a percentage of revenue. The increase in
direct labor costs was the result of higher overtime pay and an
increase in health insurance expense due to higher enrollment and
utilization. The increase in occupancy costs was due to increases
in rent, utilities, and maintenance expenses.
Net income for the six months ended March 31, 2017 was $9.7
million compared to $1.7 million for the same period of the prior
year.
Basic and diluted net income per common share from continuing
operations was $0.26 for the six months ended March 31, 2017,
compared to $0.05 for the same period of the prior year.
Adjusted EBITDA for the six months ended March 31, 2017 was
$76.1 million, or 10.5% of net revenue, compared to Adjusted EBITDA
of $77.5 million, or 11.2% of net revenue, for the same period of
the prior year. In addition to the operating factors described
above, the period-over-period decline in Adjusted EBITDA was impact
by a $1.9 million gain from a favorable contract settlement
realized during the prior period that did not recur. Furthermore,
the prior period benefited from $3.0 million less in sales
adjustments. These items were partially offset by $0.5 million in
non-operating gains in the current period resulting in a net
period-over-period impact of $4.4 million.
Fiscal 2017 Outlook and Guidance
The Company is confirming its fiscal year 2017 net revenue and
Adjusted EBITDA guidance that it originally communicated on
December 14, 2016 during the release of fiscal 2016 fourth quarter
and full year results.
For fiscal 2017, we are maintaining our guidance for net revenue
with a range of $1.48 billion to $1.52 billion and Adjusted EBITDA
with a range of $162.0 million to $166.0 million.
A reconciliation of the low-end and high-end of the Adjusted
EBITDA guidance to net income is as follows:
Fiscal Year Ending September 30,
2017
(In millions)
Low-end High-end
Net income $ 25.3 $ 27.7 Provision for income taxes 16.8 18.4
Interest expense, net 32.7 32.7 Depreciation and amortization 75.0
75.0 Stock-based compensation 10.0 10.0 Contingent consideration
adjustment 0.4 0.4 Expense reduction project costs 1.8
1.8 Adjusted EBITDA $ 162.0
$ 166.0
Modeling guidelines for the current fiscal year assume the
following:
Average basic and diluted shares outstanding
for the year: 37.5 millionCapital expenditures: 3.3% of net
revenueAnnual tax rate: 40%
Net income as presented in the reconciliation of Adjusted EBITDA
guidance to net income may be further impacted by potential future
non-operating charges that would impact net income without
affecting Adjusted EBITDA.
Conference CallThis afternoon, Wednesday, May 10, 2017,
Civitas Solutions management will host a conference call at 5:00 pm
(Eastern Time) to discuss the fiscal 2017 second quarter operating
results.
Conference Call Dial-in #: Domestic
U.S. Toll Free: 877-255-4315 International: 412-317-5467
Replay Details (available 1 hour after conclusion of the
conference call through 5/17/2017):
Domestic U.S. Toll Free: 877-344-7529
International: 412-317-0088 Canada Toll Free: 855-669-9658 Replay
Access Code: 10106794
A live webcast of the conference call will be available via the
investor relations section of the Company’s website:
www.civitas-solutions.com. Following the call, an archived replay
of the webcast will be available on this website through August 10,
2017.
Non-GAAP Financial Information
This earnings release includes a discussion of Adjusted EBITDA,
net revenue excluding ARY divested operations, and net debt, which
are non-GAAP financial measures. Adjusted EBITDAis presented
because it is an important measure used by management to assess
financial performance, and management believes it provides a more
transparent view of the Company’s underlying operating performance
and operating trends. In addition, the Company believes this
measurement is important because securities analysts, investors and
lenders use this measurement to compare the Company’s performance
to other companies in our industry. Net revenue excluding ARY
divested operations is presented to enhance investors’
understanding of the financial performance and operating trends of
the continuing operations. Net debt is presented because it is
useful for lenders, securities analysts, and investors in
determining the Company's net debt leverage ratio.
The non-GAAP financial measures are not determined in accordance
with GAAP and should not be considered in isolation or as
alternatives to net income, revenues or total debt or other
financial statement data presented as indicators of financial
performance or liquidity, each as presented in accordance with
GAAP. Adjusted EBITDA should not be considered as a measure of
discretionary cash available to us to invest in the growth of our
business. While we and other companies in our industry frequently
use Adjusted EBITDA as a measure of operating performance and the
ability to meet debt service requirements, it is not necessarily
comparable to other similarly titled captions of other companies
due to potential inconsistencies in the methods of calculation. All
non-GAAP financial measures should be reviewed in conjunction with
the Company’s financial statements filed with the SEC.
For a reconciliation of each non-GAAP financial measure to the
most directly comparable GAAP financial measure, please see
“Reconciliation of non-GAAP Financial Measures” on page 7 of this
press release.
Forward-Looking Statements
This press release contains statements about future events and
expectations that constitute forward-looking statements, including
our guidance, outlook and statements about our expectations for
future financial performance. Forward-looking statements are based
on our beliefs, assumptions and expectations of industry trends,
our future financial and operating performance and our growth,
taking into account the information currently available to us.
These statements are not statements of historical fact.
Forward-looking statements involve risks and uncertainties that may
cause our actual results to differ materially from the expectations
of future results we express or imply in any forward-looking
statements and you should not place undue reliance on such
statements. Factors that could contribute to these differences
include, but are not limited to: reductions or changes in Medicaid
or other funding; changes in budgetary priorities by federal, state
and local governments; substantial claims, litigation and
governmental proceedings; reductions in reimbursement rates or
changes in policies or payment practices by the Company’s payors;
increases in labor costs; matters involving employees that may
expose the Company to potential liability; the Company’s
substantial amount of debt; the Company’s ability to comply with
billing and collection rules and regulations; changes in economic
conditions; increases in insurance costs; increases in workers
compensation-related liability; the Company’s ability to maintain
relationships with government agencies and advocacy groups;
negative publicity; the Company’s ability to maintain existing
service contracts and licenses; the Company’s ability to implement
its growth strategies successfully; the Company’s financial
performance; and other factors described in “Risk Factors” in
Civitas’ Form 10-K. Words such as “anticipates”, “believes”,
“continues”, "positions", “estimates”, “expects”, “goal”,
"aspiration", “objectives”, “intends”, “may”, “hope”,
“opportunity”, “plans”, “potential”, “near-term”, “long-term”,
“projections”, “assumptions”, “projects”, “guidance”, “forecasts”,
“outlook”, “target”, “trends”, “should”, “could”, “would”, “will”
and similar expressions are intended to identify such
forward-looking statements. We qualify any forward-looking
statements entirely by these cautionary factors. We assume no
obligation to update or revise any forward-looking statements for
any reason, or to update the reasons actual results could differ
materially from those anticipated in these forward-looking
statements, even if new information becomes available in the
future. Comparisons of results for current and any prior periods
are not intended to express any future trends or indications of
future performance, unless expressed as such, and should only be
viewed as historical data.
Select Financial Highlights
($ in thousands, except share and per
share data)
(unaudited)
Three Months Ended,March 31,
Six Months Ended,March 31,
2017 2016
2017
2016 Gross revenue $ 367,755 $ 349,086 $ 732,197 $
698,822 Sales adjustments (5,356 ) (3,403 )
(10,404 ) (7,392 ) Net revenue 362,399 345,683 721,793
691,430 Cost of revenue 285,518 265,804 569,494 536,816 Operating
expenses: General and administrative expenses 41,787 40,084 83,579
89,626 Depreciation and amortization 18,830
18,331 36,985 36,318 Total
operating expenses 60,617 58,415
120,564 125,944 Income from operations 16,264
21,464 31,735 28,670 Other income (expense): Other income
(expense), net 855 (143 ) 911 (958 ) Interest expense (8,293
) (8,464 ) (16,778 ) (17,037 ) Income from continuing
operations before income taxes 8,826 12,857 15,868 10,675 Provision
for income taxes 3,347 5,344
6,210 8,736 Income from continuing operations 5,479
7,513 9,658 1,939 Loss from discontinued operations, net of tax
— (198 ) — (228 ) Net income $
5,479 $ 7,315 $ 9,658 $ 1,711 Income
per common share, basic and diluted Income from continuing
operations $ 0.15 $ 0.20 $ 0.26 $ 0.05 Loss from discontinued
operations — — — —
Net income $ 0.15 $ 0.20 $ 0.26 $ 0.05
Weighted average number of common shares outstanding, basic
37,282,320 37,102,113 37,256,412 37,098,677 Weighted average number
of common shares outstanding, diluted 37,416,635 37,207,096
37,372,153 37,245,466
Selected Balance Sheet and Cash Flow
Highlights
($ in thousands)
(unaudited)
As of
March 31, 2017
September 30, 2016
Cash and cash equivalents
$
17,181
$
50,683
Working capital (a)
$
73,006
$
77,354
Total assets
$
1,063,082
$
1,086,158
Total debt (b)
$
641,046
$
644,591
Net debt (c)
$
573,865
$
543,908
Stockholders' equity
$
162,478
$
145,590
Six Months Ended March 31,
2017
2016 Cash flows provided by (used in):
Operating activities
$
23,012 $ 31,949
Investing activities
$
(46,424 ) $ (62,424 )
Financing activities
$
(10,090 ) $ (4,090 )
Purchases of property and equipment
$
(20,795 ) $ (19,019 )
Acquisition of businesses, net of cash
acquired
$
(27,356 ) $ (44,319 )
(a) Calculated as current assets minus current liabilities.(b)
Total debt includes obligations under capital leases and excludes
deferred financing costs and original issue discount on the term
loan.(c) Represents net debt as defined in our senior credit
agreement (total debt, net of cash and cash equivalents and
restricted cash). See Reconciliation of non-GAAP Financial Measures
for a reconciliation of total debt to net debt.
Reconciliation of Non-GAAP Financial
Measures
($ in thousands)
(unaudited)
Three Months Ended March
31,
Six Months Ended March
31,
2017
2016
2017
2016
Net income
$
5,479
$
7,315
$
9,658
$
1,711
Loss from discontinued operations, net of tax
—
198
—
228
Provision for income taxes
3,347
5,344
6,210
8,736
Interest expense, net
8,291
8,461
16,773
16,810
Depreciation and amortization
18,830
18,331
36,985
36,318
Adjustments: Stock-based compensation (a)
2,294
1,715
4,373
13,434
Exit costs(b)
—
(135
)
—
2,005
Contingent consideration adjustment (c)
—
—
375
(2,945
)
Sale of business(d)
—
—
—
1,250
Expense reduction project costs(e)
375
—
1,750
—
Adjusted EBITDA
$
38,616
$
41,229
$
76,124
$
77,547
(a) Represents non-cash stock-based compensation expense. For
the six months ended March 31, 2016, stock-based compensation
includes $10.5 million of expense related to certain awards under
our former equity compensation plan that vested in connection with
our secondary offering and the distribution of our shares held by
NMH Investment, LLC in October 2015. The vesting of these awards
impacted the allocation of the shares of Civitas that were
distributed from NMH Investment, LLC to our private equity sponsor
and management and not the number of shares outstanding.(b)
Represents severance and lease terminations costs associated with
our ARY divestitures.(c) Represents the fair value adjustment
associated with acquisition related contingent consideration
liabilities.(d) Represents the loss recorded on the sale of our
North Carolina ARY business.(e) Represents consulting and severance
costs incurred in connection with the Company's project to optimize
business operations and reduce company-wide expenses.
Reconciliation of Non-GAAP Financial
Measures (continued)
($ in thousands)
(unaudited)
Reconciliations of net revenue to net
revenue excluding ARY divested operations, for the six months ended
March 31, 2017 and 2016 are as follows:
Six Months Ended March 31,
2017
2016
$ Change
% Change
Net revenue $ 721,793 $ 691,430 $ 30,363 4.4 % Less net revenue
from ARY divested operations 19 7,033 (7,014 ) ARY net revenue
excluding ARY divested operations $ 721,774 $ 684,397 $ 37,377 5.5
%
Six Months Ended March 31,
2017
2016
$ Change
% Change
ARY net revenue $ 71,417 $ 77,915 $ (6,498 ) (8.3 )% Less net
revenue from ARY divested operations 19 7,033 (7,014 ) ARY net
revenue excluding ARY divested operations $ 71,398 $ 70,882 $ 516
0.7 %
A reconciliation of reported debt to net debt is as follows:
As of
March 31, 2017
September 30, 2016
Reported Debt(1) $ 634,892 $ 637,523 Original
issue discount on term loan, net of accumulated amortization 1,039
1,178 Deferred financing costs, net of accumulated amortization
5,115 5,890 Total debt $ 641,046
$ 644,591 Cash and cash equivalents 17,181 50,683 Restricted cash
50,000 50,000 Net debt $ 573,865
$ 543,908
(1) Reported debt includes obligations under capital leases.
About Civitas
Civitas Solutions, Inc. is the leading national provider of
home- and community-based health and human services to must-serve
individuals with intellectual, developmental, physical or
behavioral disabilities and other special needs. Since our founding
in 1980, we have evolved from a single residential program to a
diversified national network offering an array of quality services
in 35 states.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170510006563/en/
Civitas Solutions, Inc.Dwight Robson, 617-790-4800Chief Public
Strategy and Marketing
Officerdwight.robson@civitas-solutions.com
Civitas Resources (NYSE:CIVI)
Historical Stock Chart
From Mar 2024 to Apr 2024
Civitas Resources (NYSE:CIVI)
Historical Stock Chart
From Apr 2023 to Apr 2024